Local retailer Nakumatt Holdings was on Tuesday liquidated following a Tuesday meeting with the creditors including; KCB Group, Standard Chartered Bank, Diamond Trust Bank, suppliers, and landlords.
The creditors are owed Sh39 billion by the retailer but will only receive a share of the Sh422 million paid by Naivas for the sale of six Nakumatt branches.
This was after the court-appointed administrator Peter Kahi ruled out the possibility to turn around the struggling retailer.
In a notice, Kahi said: ““An attempted turnaround of the business would be very costly and the company is likely to be loss-making for the better part of the turnaround window, implying that such a turnaround would need to be financed by additional debt to sustain operations before achieving break even.”
“The Administrator is of the view that it is likely to be difficult to attract an investor to inject the substantial amount of equity required to restructure NHL’s balance sheet due to the current high degree of financial leverage,” the notice read.
The Tuesday meeting was called after an audit report by Parker Randall Eastern Africa indicated irregularities in the financials as of February 2018.
According to the report, the directors borrowed at least Ksh1 billion in interest-free soft loans by the time it was placed under administration. As of February 2018, the amount stood at Ksh948 million.
“Significant in this net balance is Ksh948 million due from the directors. These receivables are not supportable based on the available evidence. The amounts due from a director are interest free. They relate to short-term advances through a current account,” reads the auditor’s report in part.
The report notes that the amount is part of Ksh2.8 billion of related transactions that the company ‘lost’ in the suspected looting spree. Some of the amount was claimed from its Uganda, Rwanda and Tanzania subsidiaries, which ceased operations.
The administrator has written off Ksh1.5 billion of the receivables, leaving a balance of Ksh1.3 billion.
“There are no repayment plans for these balances; the companies frequently lend and borrow funds from each other,” the auditor said.
Up until February 2017, Nakumatt had 60 operational branches across the region (44 in Kenya, 8 in Uganda, 5 Tanzania and 3 in Rwanda) but had to scale down to 7 as at April 2018.
The family owned retailer was placed under administration on 22nd January 2018.